Crisis Is Exposing Sweden’s Structural Problems, Swedbank Says

(Bloomberg) -- Sweden’s economy is being hit hard by the Covid-19 pandemic even though the country hasn’t shut down society as extensively as many others have, according to Swedbank economists.

The crisis is also exposing structural problems in the Nordic nation, including a dysfunctional housing market and limited job opportunities for young people and newly arrived immigrants, Andreas Wallstrom said in the bank’s outlook report.

“The corona’s unfortunate damages to elderly care drew attention to how we care for our elderly, a social issue that will become even more important in the context of the ageing population,” the economists said.

The bank expects the decline in the Swedish economy this year to be “deep and extensive” despite unprecedented fiscal and monetary policy measures.

GDP is forecast to fall by about 7% in the second quarter compared with the previous three-month period, marking the fastest decline ever recorded. Looking further out, GDP will contract by 4.9% this year and rise by almost 2% in 2021, the bank said.

In terms of monetary policy, Swedbank says it’s “counterproductive to stimulate the economy with rate cuts, especially as the impact of negative interest rates on the economy is uncertain.” It expects the repo rate to remain at zero during the forecast period.

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